New Jersey will save nearly half a billion dollars on health care costs over the next two years following a deal struck between the governor’s office and the state’s public-sector unions, including the New Jersey Education Association, the state’s largest, Gov. Phil Murphy announced Monday.
The agreement covers unions representing local, state and county employees; college professors; and school employees.
Savings will include $274 million in cost reductions for public employees and retirees in the coming health care year, which starts Jan. 1. The state will also save $222 million in the 2020 calendar year by adopting Medicare Advantage for retirees of both the state health benefits program (SHBP) and the school employees health benefit plans plan (SEHBP).
“As I’ve said from Day One, I believe in the power of collective bargaining and negotiating in good faith with our workforce. Today’s agreement is a testament that this approach works – for the state of New Jersey, for workers and for our taxpayers,” Murphy said in a prepared statement.
He added the deal will allow for “improved delivery of health care for beneficiaries and significant cost savings for the state, local governments and New Jersey taxpayers.”
The SEHBP Plan Design Committee approved the reforms Monday morning. They will still need a final vote from the School Employees’ Health Benefits Commission on Wednesday.
Since taking office in January, Murphy has argued the state should fully meet its pension and health care obligations.
“We must also understand that public employees are part of the solution to the state’s fiscal woes, but sadly many are struggling to get by and provide for their families,” Murphy said. “That’s why I’m calling on the Legislature to provide relief to firefighters, educators, police officers and public workers from some of the most harmful effects of Chapter 78.”
Enacted in 2011, Chapter 78 requires public employees and retirees to field a larger share of their health care premiums, which is phased in during a multiyear period and depends on the participant’s income level.
Monday’s reforms call for encouraging active SEHBP members and early retirees to use in-network primary and specialty care physicians by not requiring any co-payments.
Recent retirees eligible for Medicare, who are currently enrolled in the PPO 10 and PPO 15 plans, will be migrated to a Medicare Advantage Plan, called the SEHBP Educators Medicare Plan.
NJEA President Marie Blistan said the agreement is a “great example of the win-win outcomes we can achieve when labor is viewed as a partners in progress and not an opponent.”
“Providing affordable, high-quality health care for working people is one of the greatest challenges facing our state, and one of the most important things we must achieve,” Blistan said.
In the 2019 fiscal year, the state expects to save $37 million in the SHBP by adopting a number of formula changes adopted in 2016, which have to do with the use of generic medication and out-of-network reforms.
Aetna’s bid for the SHBP retiree contract for Medicare Advantage will yield additional savings for state and local governments over the next two years, Murphy said.
The state’s efforts to tackle its health care costs have been front and center during Murphy’s first year in office.
In August, the New Jersey Fiscal Policy and Fiscal Policy Working Group commissioned by Senate President Stephen Sweeney, D-3rd District, unveiled its proposals.
The panel called for shifting state and local health plans from platinum to gold level coverage. Sweeney has alleged that Murphy’s office hadn’t responded to calls to take part in the commission.
Under the platinum plan, the state pays 97 cents for every dollar spent on health care coverage. The gold plan reduces that to 80 cents for every dollar.
Anthony Russo, president of the Commerce and Industry Association of New Jersey, lauded the Murphy administration for striking an agreement.
“The Commerce & Industry Association of New Jersey applauds Gov. Murphy and his administration for taking a step in the right direction to cut costs while maintaining high-quality health care for public employees in New Jersey,” Russo said. “The agreement reached today between labor groups and the state will save hundreds of millions of dollars over the next few years yet will still provide public employees and retirees quality medical care while improving the delivery of health care for those enrolled in the benefits program. This type of effective, smart cost-cutting is what New Jersey needs to grow its economy.”
The New Jersey Chamber of Commerce also praised the deal.
“We congratulate Gov. Phil Murphy and the leaders from the teachers and public sector unions on the announcement today that the administration has reached a cost-cutting health care benefits agreement,” the chamber said in a statement. “The cost of providing health care to members of public sector unions has been a major issue for many years. This announced agreement is a significant first step towards addressing the issue and moving from discussion to action. It is long overdue.”
Meanwhile, Senate Minority Leader Tom Kean, R-21st District, said Murphy should look at the Sweeney commission's proposal to shift state health plans from platinum to gold.
“Taxpayers deserve to know that every opportunity to achieve savings on the massive cost of public employee health benefits is being investigated,” Kean said. “They deserve to know where the governor stands on platinum-to-gold, which would produce the greatest savings for taxpayers of any proposed health benefit reform.”